Company Achieved Record Sales and Production Volumes
$2.0 Billion Cash on Balance Sheet
Global Nitrogen Tradeflows Transitioning, North America Pricing
Affected Most
DEERFIELD, Ill.--(BUSINESS WIRE)--
CF Industries Holdings, Inc. (NYSE: CF), the global leader in nitrogen
fertilizer manufacturing and distribution, today announced results for
its second quarter ended June 30, 2017.
Second Quarter Highlights
-
Net earnings of $3 million, or $0.01 per diluted share; adjusted net
earnings(1) of $23 million or $0.10 per diluted share(1)
-
EBITDA(2) of $275 million; adjusted EBITDA(2) of
$303 million
-
Highest sales volume in company's history, exceeding five million tons
in a quarter for first time
-
Largest quarterly production volume in company's history
-
Start-up of 400ktpa diesel exhaust fluid unit (urea equivalent) at
Donaldsonville Nitrogen Complex
-
Received approximately $815 million in federal tax refunds
Overview of Results
CF Industries Holdings, Inc., today announced second quarter 2017 net
earnings attributable to common stockholders of $3 million, or $0.01 per
diluted share, and adjusted net earnings of $23 million, or $0.10 per
diluted share. Second quarter 2017 EBITDA was $275 million, and adjusted
EBITDA was $303 million. These results compare to second quarter 2016
net earnings attributable to common stockholders of $47 million, or
$0.20 per diluted share; adjusted net earnings for the second quarter
2016 of $77 million, or $0.33 per diluted share; EBITDA of $329 million;
and adjusted EBITDA of $342 million. Second quarter 2017 results include
a realized loss on natural gas hedges of $4 million, compared to a
realized loss on natural gas hedges of $61 million for the second
quarter of 2016.
“The CF team delivered outstanding operational performance during the
second quarter," said Tony Will, president and chief executive officer,
CF Industries Holdings, Inc. "We ran our plants safely and at high
utilization rates, sold record volumes and delivered cost efficiencies
in the head office and across the manufacturing and distribution system.
Our focus on execution is particularly critical during the current
challenging market environment."
_________________________________________________________________________
|
(1) |
|
See reconciliations of adjusted net earnings and adjusted net
earnings per diluted share to the most directly comparable GAAP
measures in the tables accompanying this release.
|
(2) | |
EBITDA is defined as net earnings attributable to common
stockholders plus interest expense (income)-net, income taxes, and
depreciation and amortization. See reconciliations of EBITDA and
adjusted EBITDA to the most directly comparable GAAP measures in the
tables accompanying this release.
|
Manufacturing Operations
CF Industries' manufacturing network operated efficiently and continued
its focus on safety during the second quarter of 2017. As of June 30,
2017, CF Industries' 12-month rolling average recordable incident rate
was 0.91 incidents per 200,000 work hours, well below industry averages.
Second quarter production levels were the highest in the history of the
company. Gross ammonia production during the second quarter of 2017 was
2.7 million tons, 33 percent higher than in the second quarter of 2016.
The CF system operated at a high utilization rate, including the new
Port Neal ammonia plant, which ran at more than 115 percent of nameplate
capacity in the second quarter.
During the quarter, the company successfully started up a 400,000 tons
per year diesel exhaust fluid unit (urea equivalent) at the
Donaldsonville Nitrogen Complex. The new plant brings additional
flexibility to Donaldsonville's product mix, and allows the company to
pursue additional customer demand in the growing use of nitrogen for
emission control applications.
Sales Overview
Sales volumes for the quarter were significantly higher compared to the
second quarter of 2016 as the company's production increased with
additional production capacity at the Donaldsonville and Port Neal
Nitrogen Complexes.
Net sales in the second quarter of 2017 decreased to $1,124 million from
$1,134 million in the same period last year as record sales volumes were
offset by lower average selling prices across most segments.
Global nitrogen prices in the second quarter were lower year-over-year
due to recent worldwide capacity expansions. Prices in North America
were pressured further by a high level of imports that arrived in the
first quarter and unfavorable weather in March and April that delayed
fertilizer purchases and applications. Additionally, CF's sales in the
quarter included a higher proportion of lower-priced ammonia and urea
ammonium nitrate (UAN) export sales than the prior year.
The company's average selling price for ammonia was $338 per ton in the
second quarter of 2017 compared to $411 per ton in the second quarter of
2016. The average selling price for urea was $212 per ton in the second
quarter of 2017 compared to $247 per ton in the second quarter of 2016,
and the average selling price for UAN was $175 per ton in the second
quarter of 2017 compared to $202 per ton in the second quarter of 2016.
Cost of sales per ton increased 42 percent in the second quarter of 2017
compared to the second quarter of 2016, and increased 19 percent for the
first six months of 2017 compared to the first six months of 2016, due
to the impact of the unrealized net mark-to-market loss on natural gas
derivatives in the second quarter of 2017 compared to a gain in the same
quarter of 2016, higher realized gas costs and increased depreciation
and amortization. Controllable cost of sales, defined as non-gas cash
costs (maintenance, labor, electricity, other raw materials,
transportation and distribution, and other plant costs), which excludes
the impact of natural gas, derivatives and depreciation and
amortization, decreased $28 million, or 15 percent per ton,(3)
in the second quarter of 2017 compared to 2016, and $45 million, or 17
percent per ton, year-to-date, as a result of the company's targeted
cost reduction initiatives and increases in volume.
In the second quarter of 2017, the average cost of natural gas reflected
in cost of sales for the company was $3.39 per MMBtu, which includes a
realized loss of $0.04 per MMBtu on natural gas hedges totaling $4
million. This compares to the average cost of natural gas in cost of
sales of $2.85 per MMBtu for the second quarter of 2016, which included
a realized loss of $0.75 per MMBtu on natural gas hedges totaling $61
million. During the second quarter of 2017, the average price of natural
gas at Henry Hub in North America was $3.05 per MMBtu, and the average
price of natural gas at the National Balancing Point in the United
Kingdom was $4.85 per MMBtu.
Additionally, the company recorded an unrealized net mark-to-market loss
on natural gas derivatives of $18 million in the second quarter of 2017
compared to an unrealized net mark-to-market gain on natural gas
derivatives of $211 million in the second quarter of 2016. The company
did not enter into any additional natural gas hedges in the second
quarter of 2017.
_________________________________________________________________________
|
(3) |
|
See reconciliation of controllable cost of sales and controllable
cost of sales per ton to the most directly comparable GAAP
measures in the tables accompanying this release.
|
Outlook
CF expects nitrogen pricing to be challenged through the remainder of
2017 and into 2018 as the global marketplace continues to adapt to the
significant capacity increases of recent years.
This transition suggests global tradeflows will re-align, which is
beginning to happen. Marginal producers in China are supplying less
product to the global marketplace, a trend that CF expects to continue.
Urea exports from China totaled 2.8 million metric tons through June, a
decline of 46 percent from the same period in 2016. Published operating
rates in China during the second quarter of 2017 were approximately 60
percent.
Additionally, over the last year, multiple industry participants outside
of China have announced price-driven curtailments and reduced exports.
These announcements, which have affected tradeflows not only in urea but
also in ammonia and UAN, have occurred in Eastern Europe, Russia, South
Asia and Ukraine.
North America, which will be import-dependent for the foreseeable
future, is seeing changes to its tradeflows as well. Urea and UAN
imports through May are down 22 percent and 10 percent respectively.
These declines, while significant, are not as large as would be expected
given recent North American capacity additions. In fact, due to high
import levels in the first quarter, many shipments that arrived after
April did not enter distribution channels. This contributed to urea
barge prices in New Orleans averaging $30 per ton below international
parity during the quarter and breaking through 2016 lows in June. Prices
subsequently rebounded slightly in July as some of this oversupply was
re-exported to other destinations. However, with North America entering
what is typically its period of lowest demand and prices, new pricing
lows could be reached should substantial imports arrive in the third
quarter.
Longer term, global supply growth will slow. CF expects a net 6.2
million metric tons of nameplate urea capacity to start-up in 2017 and
2018. After 2018, the rate of net new capacity growth is expected to
fall below the long-term annual nitrogen demand growth rate of
approximately two percent, helping to tighten the global supply and
demand balance going forward.
Capital Expenditures
New capital expenditures for 2017 are expected to be approximately $400
million. Additionally, as of June 30, 2017, the company had
approximately $175 million in costs accrued but yet unpaid for work
completed in 2016 related to the capacity expansion projects. Most of
this unpaid amount is the subject of disputes between the company and
certain contractors and vendors. Actual cash expenditures for 2017 will
reflect any payments for these capacity expansion project amounts if or
when they are made.
Liquidity
As of June 30, 2017, the company had cash and cash equivalents of $2.0
billion on the balance sheet, had no borrowings outstanding under its
$750 million revolving credit facility and was in compliance with all
applicable covenant requirements under its debt instruments.
In June, the company announced that it had received federal tax refunds
of approximately $815 million due to the carryback of certain federal
tax losses from the 2016 tax year to prior periods. These tax losses are
primarily related to accelerated tax depreciation of the company’s
capacity expansion projects that were placed in service in 2016. The
receipt of the federal tax refunds was earlier than the previously
stated expectations, which had been the third quarter of 2017. The
company intends to use the proceeds to fund the payment of $800 million
in debt coming due in 2018.
CHS Inc. Distribution
On July 31, 2017, the Board of Managers of CF Industries Nitrogen, LLC
approved a semi-annual distribution payment to CHS Inc. of $59 million
for the distribution period ended June 30, 2017. The distribution was
paid on July 31, 2017.
Consolidated Results |
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per share and per MMBtu amounts) |
|
Net sales
| |
$
|
1,124
| | |
$
|
1,134
| | |
$
|
2,161
| | |
$
|
2,138
| |
|
Cost of sales
| |
952
|
| |
607
|
| |
1,883
|
| |
1,394
|
|
|
Gross margin
| |
$
|
172
|
| |
$
|
527
|
| |
$
|
278
|
| |
$
|
744
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
15.3
|
%
| |
46.5
|
%
| |
12.9
|
%
| |
34.8
|
%
|
| | | | | | | |
|
|
Net earnings (loss) attributable to common stockholders
| |
$
|
3
| | |
$
|
47
| | |
$
|
(20
|
)
| |
$
|
73
| |
|
Adjusted net earnings (1) | |
$
|
23
| | |
$
|
77
| | |
$
|
34
| | |
$
|
170
| |
| | | | | | | |
|
|
Net earnings (loss) per diluted share
| |
$
|
0.01
| | |
$
|
0.20
| | |
$
|
(0.09
|
)
| |
$
|
0.31
| |
|
Adjusted net earnings per diluted share(1) | |
$
|
0.10
| | |
$
|
0.33
| | |
$
|
0.15
| | |
$
|
0.72
| |
| | | | | | | |
|
|
EBITDA(1) | |
$
|
275
| | |
$
|
329
| | |
$
|
493
| | |
$
|
536
| |
|
Adjusted EBITDA(1) | |
$
|
303
| | |
$
|
342
| | |
$
|
575
| | |
$
|
642
| |
| | | | | | | |
|
|
Tons of product sold (000s)
| |
5,046
| | |
4,557
| | |
9,791
| | |
8,608
| |
| | | | | | | |
|
|
Supplemental data (per MMBtu):
| | | | | | | | |
|
Natural gas costs in cost of sales(2) | |
$
|
3.35
| | |
$
|
2.10
| | |
$
|
3.50
| | |
$
|
2.29
| |
|
Realized derivatives loss in cost of sales(3) | |
0.04
|
| |
0.75
|
| |
0.01
|
| |
0.77
|
|
|
Cost of natural gas in cost of sales
| |
$
|
3.39
| | |
$
|
2.85
| | |
$
|
3.51
| | |
$
|
3.06
| |
| | | | | | | |
|
|
Average daily market price of natural gas (per MMBtu):
| | | | | | | | |
| Henry Hub | |
$
|
3.05
| | |
$
|
2.10
| | |
$
|
3.02
| | |
$
|
2.04
| |
|
National Balancing Point UK | |
$
|
4.85
| | |
$
|
4.50
| | |
$
|
5.43
| | |
$
|
4.43
| |
| | | | | | | |
|
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
$
|
18
| | |
$
|
(211
|
)
| |
$
|
71
| | |
$
|
(190
|
)
|
| | | | | | | |
|
|
Depreciation and amortization
| |
$
|
217
| | |
$
|
181
| | |
$
|
422
| | |
$
|
327
| |
|
Capital expenditures
| |
$
|
91
| | |
$
|
703
| | |
$
|
185
| | |
$
|
1,379
| |
| | | | | | | |
|
|
Production volume by product tons (000s):
| | | | | | | | |
|
Ammonia(4) | |
2,656
| | |
1,991
| | |
5,164
| | |
3,994
| |
|
Granular urea
| |
1,236
| | |
808
| | |
2,238
| | |
1,627
| |
|
UAN (32%)
| |
1,722
| | |
1,771
| | |
3,539
| | |
3,289
| |
|
AN
| |
459
| | |
386
| | |
1,001
| | |
817
| |
_______________________________________________________________________________
|
(1) |
|
See reconciliations of EBITDA, adjusted EBITDA, adjusted net
earnings and adjusted net earnings per diluted share to the most
directly comparable GAAP measures in the tables accompanying this
release.
|
(2) | |
Includes the cost of natural gas that is included in cost of sales
during the period under the first-in, first-out inventory cost
method.
|
(3) | |
Includes realized gains and losses on natural gas derivatives
settled during the period. Excludes unrealized mark-to-market gains
and losses on natural gas derivatives.
|
(4) | |
Gross ammonia production including amounts subsequently upgraded
into other products.
|
During the three and six months ended June 30, 2017 and 2016, certain
significant items impacted our financial results. The following table
outlines these significant items and how they impacted the comparability
of our financial results during these periods. During the three months
ended June 30, 2017 and 2016, we reported net earnings attributable to
common stockholders of $3 million and $47 million, respectively. During
the six months ended June 30, 2017 and 2016, we reported net (loss)
earnings attributable to common stockholders of $(20) million and
$73 million, respectively.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 |
| 2017 |
| 2016 |
| | Pre-Tax |
| After-Tax | | Pre-Tax |
| After-Tax | | Pre-Tax |
| After-Tax | | Pre-Tax |
| After-Tax |
| | (in millions) |
|
Depreciation and amortization(1) | |
$
|
217
| |
|
$
|
137
| | |
$
|
181
| |
|
$
|
114
| | |
$
|
422
| |
|
$
|
265
| | |
$
|
327
| |
|
$
|
205
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives(2) | |
18
| | |
11
| | |
(211
|
)
| |
(132
|
)
| |
71
| | |
44
| | |
(190
|
)
| |
(119
|
)
|
|
Transaction costs(3) | |
—
| | |
—
| | |
165
| | |
84
| | |
—
| | |
—
| | |
179
| | |
96
| |
|
Loss on foreign currency transactions including intercompany loans(4)(5) | |
1
| | |
1
| | |
38
| | |
37
| | |
1
| | |
1
| | |
83
| | |
81
| |
|
Capacity expansion project expenses(4) | |
—
| | |
—
| | |
19
| | |
12
| | |
—
| | |
—
| | |
35
| | |
22
| |
|
Equity method investment tax contingency accrual(6) | |
7
| | |
7
| | |
—
| | |
—
| | |
7
| | |
7
| | |
—
| | |
—
| |
|
Financing costs related to bridge loan commitment fee(7) | |
—
| | |
—
| | |
28
| | |
18
| | |
—
| | |
—
| | |
28
| | |
18
| |
| Strategic Venture with CHS: | | | | | | | | | | | | | | | | |
|
Noncontrolling interest(8) | |
15
| | |
15
| | |
23
| | |
23
| | |
23
| | |
23
| | |
40
| | |
40
| |
|
Loss on embedded derivative(4)(9) | |
2
|
|
|
1
|
| |
—
|
|
|
—
|
| |
3
|
|
|
2
|
| |
—
|
|
|
—
|
|
| Total Impact of Significant Items | |
$
|
260
|
|
|
$
|
172
|
| |
$
|
243
|
|
|
$
|
156
|
| |
$
|
527
|
|
|
$
|
342
|
| |
$
|
502
|
|
|
$
|
343
|
|
_______________________________________________________________________________
|
(1) |
|
Included primarily in cost of sales and selling, general and
administrative expenses in our consolidated statements of operations.
|
(2) | |
Included in cost of sales in our consolidated statements of
operations.
|
(3) | |
Transaction costs relate to costs of various consulting and legal
services associated with the company's proposed combination with
certain businesses of OCI and the company's strategic venture with
CHS.
|
(4) | |
Included in other operating—net in our consolidated statements of
operations.
|
(5) | |
Primarily relates to the unrealized foreign currency exchange rate
impact on intercompany debt that has not been permanently invested.
|
(6) | |
Represents an accrual on the books of Point Lisas Nitrogen Ltd.
(PLNL), the company's Trinidad joint venture, for a disputed tax
assessment. Amount reflects the company's 50 percent equity interest
in PLNL. This is included in equity in losses of operating
affiliates in our consolidated statements of operations.
|
(7) | |
Included in interest expense in our consolidated statements of
operations.
|
(8) | |
Included in net earnings attributable to noncontrolling interests in
our consolidated statements of operations.
|
(9) | |
Represents the change in fair value of the embedded derivative
included within the terms of the company's strategic venture with
CHS.
|
Segment Results
Ammonia Segment
CF Industries’ ammonia segment produces anhydrous ammonia (ammonia),
which is the company’s most concentrated nitrogen fertilizer, containing
82 percent nitrogen. The results of the ammonia segment consist of sales
of ammonia to external customers. In addition, ammonia is the “basic”
nitrogen product that the company upgrades into other nitrogen
fertilizers such as urea, UAN and AN.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
389
| | |
$
|
358
| | |
$
|
671
| | |
$
|
625
| |
|
Cost of sales
| |
302
|
| |
152
|
| |
567
|
| |
356
|
|
|
Gross margin
| |
$
|
87
|
| |
$
|
206
|
| |
$
|
104
|
| |
$
|
269
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
22.4
|
%
| |
57.5
|
%
| |
15.5
|
%
| |
43.0
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
1,152
| | |
870
| | |
2,072
| | |
1,607
| |
|
Sales volume by nutrient tons (000s)(1) | |
945
| | |
713
| | |
1,699
| | |
1,318
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
338
| | |
$
|
411
| | |
$
|
324
| | |
$
|
389
| |
|
Average selling price per nutrient ton(1) | |
412
| | |
502
| | |
395
| | |
474
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
76
| | |
$
|
237
| | |
$
|
50
| | |
$
|
167
| |
|
Gross margin per nutrient ton(1) | |
92
| | |
289
| | |
61
| | |
204
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
87
| | |
$
|
206
| | |
$
|
104
| | |
$
|
269
| |
|
Depreciation and amortization
| |
49
| | |
19
| | |
93
| | |
40
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
6
|
| |
(69
|
)
| |
23
|
| |
(62
|
)
|
|
Adjusted gross margin
| |
$
|
142
|
| |
$
|
156
|
| |
$
|
220
|
| |
$
|
247
|
|
|
Adjusted gross margin as a percent of net sales
| |
36.5
|
%
| |
43.6
|
%
| |
32.8
|
%
| |
39.5
|
%
|
_______________________________________________________________________________
|
(1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
(2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
Comparison of 2017 to 2016 second quarter periods:
-
Ammonia sales volume increased for the second quarter of 2017 compared
to the second quarter of 2016 due to additional production volume from
the new capacity expansions at the company's Donaldsonville and Port
Neal Nitrogen Complexes.
-
Ammonia average selling prices decreased primarily due to greater
global nitrogen supply availability.
-
Ammonia gross margin per ton decreased in the second quarter of 2017
compared to the second quarter of 2016 due to a $6 million unrealized
net mark-to-market loss on natural gas derivatives compared to a $69
million unrealized net mark-to-market gain in the prior year period;
lower average selling prices; an increase in realized natural gas
costs; and a $30 million increase in depreciation primarily related to
the new Donaldsonville and Port Neal ammonia plants. These were
partially offset by targeted cost reduction initiatives and the
effects of increased volumes.
Granular Urea Segment
CF Industries’ granular urea segment produces granular urea, which
contains 46 percent nitrogen. Produced from ammonia and carbon dioxide,
it has the highest nitrogen content of any of the company’s solid
nitrogen fertilizers.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
259
| | |
$
|
240
| | |
$
|
497
| | |
$
|
475
| |
|
Cost of sales
| |
235
|
| |
118
|
| |
448
|
| |
293
|
|
|
Gross margin
| |
$
|
24
|
| |
$
|
122
|
| |
$
|
49
|
| |
$
|
182
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
9.3
|
%
| |
50.8
|
%
| |
9.9
|
%
| |
38.3
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
1,221
| | |
972
| | |
2,179
| | |
1,891
| |
|
Sales volume by nutrient tons (000s)(1) | |
561
| | |
447
| | |
1,002
| | |
870
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
212
| | |
$
|
247
| | |
$
|
228
| | |
$
|
251
| |
|
Average selling price per nutrient ton(1) | |
462
| | |
537
| | |
496
| | |
546
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
20
| | |
$
|
126
| | |
$
|
22
| | |
$
|
96
| |
|
Gross margin per nutrient ton(1) | |
43
| | |
273
| | |
49
| | |
209
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
24
| | |
$
|
122
| | |
$
|
49
| | |
$
|
182
| |
|
Depreciation and amortization
| |
67
| | |
25
| | |
120
| | |
50
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
5
|
| |
(55
|
)
| |
19
|
| |
(49
|
)
|
|
Adjusted gross margin
| |
$
|
96
|
| |
$
|
92
|
| |
$
|
188
|
| |
$
|
183
|
|
|
Adjusted gross margin as a percent of net sales
| |
37.1
|
%
| |
38.3
|
%
| |
37.8
|
%
| |
38.5
|
%
|
_______________________________________________________________________________
|
(1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
(2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
Comparison of 2017 to 2016 second quarter periods:
-
Granular urea sales volume increased for the quarter primarily due to
additional production volume from the new capacity expansion at the
company's Port Neal Nitrogen Complex.
-
Granular urea average selling price per ton decreased due to greater
global nitrogen supply availability.
-
Granular urea gross margin per ton decreased due to a $5 million
unrealized net mark-to-market loss on natural gas derivatives compared
to a $55 million unrealized net mark-to-market gain in the prior year
period; lower average selling prices; a $42 million increase in
depreciation and amortization primarily associated with the new Port
Neal urea plant; and an increase in realized natural gas costs. These
were partially offset by targeted cost reduction initiatives and the
effects of increased volumes.
UAN Segment
CF Industries’ UAN segment produces urea ammonium nitrate solution
(UAN). UAN is a liquid fertilizer product with nitrogen content that
typically ranges from 28 percent to 32 percent and is produced by
combining urea and ammonium nitrate in solution.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
286
| | |
$
|
370
| | |
$
|
603
| | |
$
|
679
| |
|
Cost of sales
| |
248
|
| |
197
|
| |
530
|
| |
428
|
|
|
Gross margin
| |
$
|
38
|
| |
$
|
173
|
| |
$
|
73
|
| |
$
|
251
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
13.3
|
%
| |
46.8
|
%
| |
12.1
|
%
| |
37.0
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
1,631
| | |
1,832
| | |
3,480
| | |
3,284
| |
|
Sales volume by nutrient tons (000s)(1) | |
516
| | |
577
| | |
1,100
| | |
1,034
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
175
| | |
$
|
202
| | |
$
|
173
| | |
$
|
207
| |
|
Average selling price per nutrient ton(1) | |
554
| | |
641
| | |
548
| | |
657
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
23
| | |
$
|
94
| | |
$
|
21
| | |
$
|
76
| |
|
Gross margin per nutrient ton(1) | |
74
| | |
300
| | |
66
| | |
243
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
38
| | |
$
|
173
| | |
$
|
73
| | |
$
|
251
| |
|
Depreciation and amortization
| |
56
| | |
59
| | |
121
| | |
117
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
5
|
| |
(65
|
)
| |
21
|
| |
(59
|
)
|
|
Adjusted gross margin
| |
$
|
99
|
| |
$
|
167
|
| |
$
|
215
|
| |
$
|
309
|
|
|
Adjusted gross margin as a percent of net sales
| |
34.6
|
%
| |
45.1
|
%
| |
35.7
|
%
| |
45.5
|
%
|
_______________________________________________________________________________
|
(1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
(2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
Comparison of 2017 to 2016 second quarter periods:
-
UAN sales volume decreased in the second quarter of 2017 as
unfavorable weather in North America resulted in late planting and
delayed UAN purchases and applications.
-
UAN average selling price per ton decreased due to greater global
nitrogen supply availability.
-
UAN gross margin per ton decreased in the second quarter of 2017
compared to the second quarter of 2016 due to a $5 million unrealized
net mark-to-market loss on natural gas derivatives compared to a $65
million unrealized net mark-to-market gain in the prior year period;
lower average selling prices; and an increase in realized natural gas
costs. These were partially offset by targeted cost reduction
initiatives.
AN Segment
CF Industries' AN segment produces ammonium nitrate (AN). AN is used as
a nitrogen fertilizer with nitrogen content between 29 percent to 35
percent, and also is used by industrial customers for commercial
explosives and blasting systems. AN is produced at the company's Yazoo
City, Mississippi; Billingham, United Kingdom; and Ince, United Kingdom,
complexes.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
112
| | |
$
|
90
| | |
$
|
237
| | |
$
|
215
| |
|
Cost of sales
| |
102
|
| |
90
|
| |
208
|
| |
202
|
|
|
Gross margin
| |
$
|
10
|
| |
$
|
—
|
| |
$
|
29
|
| |
$
|
13
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
8.9
|
%
| |
—
|
%
| |
12.2
|
%
| |
6.0
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
539
| | |
453
| | |
1,107
| | |
1,011
| |
|
Sales volume by nutrient tons (000s)(1) | |
183
| | |
154
| | |
374
| | |
342
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
208
| | |
$
|
199
| | |
$
|
214
| | |
$
|
213
| |
|
Average selling price per nutrient ton(1) | |
612
| | |
584
| | |
634
| | |
629
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
19
| | |
$
|
—
| | |
$
|
26
| | |
$
|
13
| |
|
Gross margin per nutrient ton(1) | |
55
| | |
—
| | |
78
| | |
38
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
10
| | |
$
|
—
| | |
$
|
29
| | |
$
|
13
| |
|
Depreciation and amortization
| |
21
| | |
28
| | |
40
| | |
50
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
1
|
| |
(9
|
)
| |
3
|
| |
(8
|
)
|
|
Adjusted gross margin
| |
$
|
32
|
| |
$
|
19
|
| |
$
|
72
|
| |
$
|
55
|
|
|
Adjusted gross margin as a percent of net sales
| |
28.6
|
%
| |
21.1
|
%
| |
30.4
|
%
| |
25.6
|
%
|
_______________________________________________________________________________
|
(1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
(2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
Comparison of 2017 to 2016 second quarter periods:
-
AN sales volume increased in the second quarter of 2017 compared to
the second quarter of 2016 due to a new long-term AN supply agreement
that commenced in 2017.
-
AN average selling price per ton increased in the second quarter of
2017 compared to the second quarter of 2016 due primarily to the
long-term AN supply agreement that commenced in 2017.
-
AN gross margin per ton increased due to higher average selling
prices, costs in the second quarter of 2016 related to the completion
of the reconfiguration at the Yazoo City complex, targeted cost
reduction initiatives and the effects of increased volumes partially
offset by a $1 million unrealized net mark-to-market loss on natural
gas derivatives compared to a $9 million unrealized net mark-to-market
gain in the prior year period and an increase in realized natural gas
costs.
-
AN segment adjusted gross margin increased in the second quarter of
2017 and year-to-date compared to these periods in 2016.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid (DEF), urea
liquor, nitric acid and compound fertilizer products (NPKs).
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
78
| | |
$
|
76
| | |
$
|
153
| | |
$
|
144
| |
|
Cost of sales
| |
65
|
| |
50
|
| |
130
|
| |
115
|
|
|
Gross margin
| |
$
|
13
|
| |
$
|
26
|
| |
$
|
23
|
| |
$
|
29
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
16.7
|
%
| |
34.2
|
%
| |
15.0
|
%
| |
20.1
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
503
| | |
430
| | |
953
| | |
815
| |
|
Sales volume by nutrient tons (000s)(1) | |
100
| | |
84
| | |
188
| | |
157
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
155
| | |
$
|
177
| | |
$
|
161
| | |
$
|
177
| |
|
Average selling price per nutrient ton(1) | |
780
| | |
905
| | |
814
| | |
917
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
26
| | |
$
|
60
| | |
$
|
24
| | |
$
|
36
| |
|
Gross margin per nutrient ton(1) | |
130
| | |
310
| | |
122
| | |
185
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
13
| | |
$
|
26
| | |
$
|
23
| | |
$
|
29
| |
|
Depreciation and amortization
| |
13
| | |
12
| | |
25
| | |
22
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
1
|
| |
(13
|
)
| |
5
|
| |
(12
|
)
|
|
Adjusted gross margin
| |
$
|
27
|
| |
$
|
25
|
| |
$
|
53
|
| |
$
|
39
|
|
|
Adjusted gross margin as a percent of net sales
| |
34.6
|
%
| |
32.9
|
%
| |
34.6
|
%
| |
27.1
|
%
|
_______________________________________________________________________________
|
(1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
(2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
Comparison of 2017 to 2016 second quarter periods:
-
Other segment volume increased in the second quarter of 2017 due
primarily to higher year-over-year sales of DEF as the company
continues to grow its North American DEF business. This was partially
offset by lower nitric acid and NPK sales compared to the prior year
period.
-
Other segment average selling price per ton decreased due primarily to
greater global nitrogen supply availability.
-
Other segment gross margin per ton decreased due to a $1 million
unrealized net mark-to-market loss on natural gas derivatives compared
to a $13 million unrealized net mark-to-market gain in the prior year
period; lower average selling prices; and an increase in realized
natural gas costs.
-
Other segment adjusted gross margin increased in the second quarter of
2017 and year-to-date compared to these periods in 2016.
Dividend Payment
On July 25, 2017, CF Industries’ Board of Directors declared a quarterly
dividend of $0.30 per common share. The dividend will be paid on
August 31, 2017 to stockholders of record as of August 15, 2017.
Conference Call
CF Industries will hold a conference call to discuss its second quarter
2017 results at 9:00 a.m. ET on Thursday, August 3, 2017. This
conference call will include discussion of CF Industries' business
environment and outlook. Investors can access the call and find dial-in
information on the Investor Relations section of the company’s website
at www.cfindustries.com.
About CF Industries Holdings, Inc.
CF Industries Holdings, Inc., headquartered in Deerfield, Illinois,
through its subsidiaries is a global leader in the manufacturing and
distribution of nitrogen products, serving both agricultural and
industrial customers. CF Industries operates world-class nitrogen
manufacturing complexes in Canada, the United Kingdom and the United
States, and distributes plant nutrients through a system of terminals,
warehouses, and associated transportation equipment located primarily in
the Midwestern United States. The company also owns a 50 percent
interest in an ammonia facility in The Republic of Trinidad and Tobago.
CF Industries routinely posts investor announcements and additional
information on the company’s website at www.cfindustries.com and
encourages those interested in the company to check there frequently.
Note Regarding Non-GAAP Financial Measures
The company reports its financial results in accordance with U.S.
generally accepted accounting principles (GAAP). Management believes
that EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted
EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a percent of net
sales, adjusted net earnings, adjusted net earnings per diluted share,
controllable cost of sales, and controllable cost of sales per ton, and,
on a segment basis, adjusted gross margin and adjusted gross margin as a
percent of net sales, which are non-GAAP financial measures, provide
additional meaningful information regarding the company's performance
and financial strength. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the company's reported
results prepared in accordance with GAAP. In addition, because not all
companies use identical calculations, EBITDA, EBITDA per ton, EBITDA as
a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton,
adjusted EBITDA as a percent of net sales, adjusted net earnings,
adjusted net earnings per diluted share, adjusted gross margin, adjusted
gross margin as a percent of net sales, controllable cost of sales and
controllable cost of sales per ton, included in this release may not be
comparable to similarly titled measures of other companies.
Reconciliations of EBITDA, EBITDA per ton, EBITDA as a percent of net
sales, adjusted EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a
percent of net sales, adjusted net earnings, adjusted net earnings per
diluted share, controllable cost of sales, and controllable cost of
sales per ton to the most directly comparable GAAP measures are provided
in the tables accompanying this release under “CF Industries Holdings,
Inc.-Selected Financial Information-Non-GAAP Disclosure Items.”
Reconciliations of adjusted gross margin and adjusted gross margin as a
percent of net sales to the most directly comparable GAAP measures are
provided in the segment tables included in this release.
Safe Harbor Statement
All statements in this communication by CF Industries Holdings, Inc.
(together with its subsidiaries, the “Company”), other than those
relating to historical facts, are forward-looking statements.
Forward-looking statements can generally be identified by their use of
terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,”
“intend,” “may,” “plan,” “predict,” “project,” “will” or “would” and
similar terms and phrases, including references to assumptions.
Forward-looking statements are not guarantees of future performance and
are subject to a number of assumptions, risks and uncertainties, many of
which are beyond the Company’s control, which could cause actual results
to differ materially from such statements. These statements may include,
but are not limited to, statements about strategic plans and statements
about future financial and operating results.
Important factors that could cause actual results to differ materially
from those in the forward-looking statements include, among others, the
cyclical nature of the Company’s business and the agricultural sector;
the global commodity nature of the Company’s fertilizer products, the
impact of global supply and demand on the Company’s selling prices, and
the intense global competition from other fertilizer producers;
conditions in the U.S. and European agricultural industry; the
volatility of natural gas prices in North America and Europe;
difficulties in securing the supply and delivery of raw materials,
increases in their costs or delays or interruptions in their delivery;
reliance on third party providers of transportation services and
equipment; the significant risks and hazards involved in producing and
handling the Company’s products against which the Company may not be
fully insured; the Company’s ability to manage its indebtedness;
operating and financial restrictions imposed on the Company by the
agreements governing the Company's senior secured indebtedness; risks
associated with the Company’s incurrence of additional indebtedness; the
Company's ability to maintain compliance with covenants under the
agreements governing its indebtedness; downgrades of the Company’s
credit ratings; risks associated with cyber security; weather
conditions; risks associated with the Company’s ability to utilize its
tax net operating losses and other tax assets, including the risk that
the use of such tax benefits is limited by an “ownership change” (as
defined under the Internal Revenue Code and related Internal Revenue
Service pronouncements); risks associated with changes in tax laws and
disagreements with taxing authorities; risks associated with expansions
of the Company’s business, including unanticipated adverse consequences
and the significant resources that could be required; potential
liabilities and expenditures related to environmental, health and safety
laws and regulations and permitting requirements; future regulatory
restrictions and requirements related to greenhouse gas emissions; the
seasonality of the fertilizer business; the impact of changing market
conditions on the Company’s forward sales programs; risks involving
derivatives and the effectiveness of the Company’s risk measurement and
hedging activities; the Company’s reliance on a limited number of key
facilities; risks associated with the operation or management of the
strategic venture with CHS Inc. (the "CHS Strategic Venture"), risks and
uncertainties relating to the market prices of the fertilizer products
that are the subject of the supply agreement with CHS Inc. over the life
of the supply agreement, and the risk that any challenges related to the
CHS Strategic Venture will harm the Company's other business
relationships; risks associated with the Company’s Point Lisas Nitrogen
Limited joint venture; acts of terrorism and regulations to combat
terrorism; risks associated with international operations; and
deterioration of global market and economic conditions.
More detailed information about factors that may affect the Company’s
performance and could cause actual results to differ materially from
those in any forward-looking statements may be found in CF Industries
Holdings, Inc.’s filings with the Securities and Exchange Commission,
including CF Industries Holdings, Inc.’s most recent annual and
quarterly reports on Form 10-K and Form 10-Q, which are available in the
Investor Relations section of the Company’s web site. Forward-looking
statements are given only as of the date of this communication and the
Company disclaims any obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.
CF INDUSTRIES HOLDINGS, INC. SELECTED FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
|
|
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions, except per share amounts) |
|
Net sales
| |
$
|
1,124
| | |
$
|
1,134
| | |
$
|
2,161
| | |
$
|
2,138
| |
|
Cost of sales
| |
952
|
| |
607
|
| |
1,883
|
| |
1,394
|
|
|
Gross margin
| |
172
|
| |
527
|
| |
278
|
| |
744
|
|
|
Selling, general and administrative expenses
| |
49
| | |
52
| | |
95
| | |
97
| |
|
Transaction costs
| |
—
| | |
165
| | |
—
| | |
179
| |
|
Other operating—net
| |
10
|
| |
63
|
| |
16
|
| |
124
|
|
|
Total other operating costs and expenses
| |
59
| | |
280
| | |
111
| | |
400
| |
|
Equity in losses of operating affiliates
| |
(6
|
)
| |
(9
|
)
| |
(3
|
)
| |
(9
|
)
|
|
Operating earnings
| |
107
| | |
238
| | |
164
| | |
335
| |
|
Interest expense
| |
80
| | |
61
| | |
160
| | |
99
| |
|
Interest income
| |
(2
|
)
| |
(1
|
)
| |
(3
|
)
| |
(2
|
)
|
|
Other non-operating—net
| |
—
|
| |
—
|
| |
—
|
| |
(2
|
)
|
|
Earnings before income taxes
| |
29
| | |
178
| | |
7
| | |
240
| |
|
Income tax provision (benefit)
| |
5
|
| |
95
|
| |
(8
|
)
| |
110
|
|
|
Net earnings
| |
24
| | |
83
| | |
15
| | |
130
| |
|
Less: Net earnings attributable to noncontrolling interests
| |
21
|
| |
36
|
| |
35
|
| |
57
|
|
|
Net earnings (loss) attributable to common stockholders
| |
$
|
3
|
| |
$
|
47
|
| |
$
|
(20
|
)
| |
$
|
73
|
|
| | | | | | | |
|
|
Net earnings (loss) per share attributable to common stockholders:
| | | | | | | | |
|
Basic
| |
$
|
0.01
|
| |
$
|
0.20
|
| |
$
|
(0.09
|
)
| |
$
|
0.31
|
|
|
Diluted
| |
$
|
0.01
|
| |
$
|
0.20
|
| |
$
|
(0.09
|
)
| |
$
|
0.31
|
|
|
Weighted-average common shares outstanding:
| | | | | | | | |
|
Basic
| |
233.5
|
| |
233.3
|
| |
233.2
|
| |
233.2
|
|
|
Diluted
| |
233.7
|
| |
233.5
|
| |
233.2
|
| |
233.5
|
|
CF INDUSTRIES HOLDINGS, INC. SELECTED FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
| (unaudited) |
| |
| | June 30, 2017 | | December 31, 2016 |
| | (in millions) |
| Assets | | | | |
|
Current assets:
| | | | |
|
Cash and cash equivalents
| |
$
|
2,001
| | |
$
|
1,164
|
|
Restricted cash
| |
4
| | |
5
|
|
Accounts receivable—net
| |
282
| | |
236
|
|
Inventories
| |
325
| | |
339
|
|
Prepaid income taxes
| |
34
| | |
841
|
|
Other current assets
| |
29
|
| |
70
|
|
Total current assets
| |
2,675
| | |
2,655
|
|
Property, plant and equipment—net
| |
9,441
| | |
9,652
|
|
Investments in affiliates
| |
120
| | |
139
|
| Goodwill | |
2,360
| | |
2,345
|
|
Other assets
| |
340
|
| |
340
|
| Total assets | |
$
|
14,936
|
| |
$
|
15,131
|
| | | |
|
| Liabilities and Equity | | | | |
|
Current liabilities:
| | | | |
|
Accounts payable and accrued expenses
| |
$
|
616
| | |
$
|
638
|
|
Income taxes payable
| |
—
| | |
1
|
|
Customer advances
| |
5
| | |
42
|
|
Current portion of long-term debt
| |
797
| | |
—
|
|
Other current liabilities
| |
23
|
| |
5
|
|
Total current liabilities
| |
1,441
|
| |
686
|
|
Long-term debt
| |
4,986
| | |
5,778
|
|
Deferred income taxes
| |
1,632
| | |
1,630
|
|
Other liabilities
| |
487
| | |
545
|
|
Equity:
| | | | |
|
Stockholders' equity
| |
3,270
| | |
3,348
|
|
Noncontrolling interests
| |
3,120
|
| |
3,144
|
|
Total equity
| |
6,390
|
| |
6,492
|
| Total liabilities and equity | |
$
|
14,936
|
| |
$
|
15,131
|
CF INDUSTRIES HOLDINGS, INC. SELECTED FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
|
|
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
| Operating Activities: | | | | | | | | |
|
Net earnings
| |
$
|
24
| | |
$
|
83
| | |
$
|
15
| | |
$
|
130
| |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
| | | | | | | | |
|
Depreciation and amortization
| |
217
| | |
181
| | |
422
| | |
327
| |
|
Deferred income taxes
| |
8
| | |
839
| | |
(8
|
)
| |
875
| |
|
Stock-based compensation expense
| |
4
| | |
5
| | |
8
| | |
9
| |
|
Unrealized net loss (gain) on natural gas and foreign currency
derivatives
| |
18
| | |
(207
|
)
| |
71
| | |
(189
|
)
|
|
Unrealized loss on embedded derivative
| |
2
| | |
—
| | |
3
| | |
—
| |
|
Loss on disposal of property, plant and equipment
| |
—
| | |
1
| | |
1
| | |
4
| |
|
Undistributed losses of affiliates—net of taxes
| |
11
| | |
5
| | |
6
| | |
1
| |
|
Changes in:
| | | | | | | | |
|
Accounts receivable—net
| |
(26
|
)
| |
20
| | |
(35
|
)
| |
24
| |
|
Inventories
| |
25
| | |
65
| | |
10
| | |
81
| |
|
Accrued and prepaid income taxes
| |
811
| | |
(650
|
)
| |
806
| | |
(673
|
)
|
|
Accounts payable and accrued expenses
| |
(17
|
)
| |
(61
|
)
| |
(12
|
)
| |
(67
|
)
|
|
Customer advances
| |
(179
|
)
| |
(214
|
)
| |
(37
|
)
| |
(149
|
)
|
|
Other—net
| |
(67
|
)
| |
33
|
| |
(63
|
)
| |
73
|
|
|
Net cash provided by operating activities
| |
831
|
| |
100
|
| |
1,187
|
| |
446
|
|
| Investing Activities: | | | | | | | | |
|
Additions to property, plant and equipment
| |
(91
|
)
| |
(703
|
)
| |
(185
|
)
| |
(1,379
|
)
|
|
Proceeds from sale of property, plant and equipment
| |
4
| | |
—
| | |
12
| | |
2
| |
|
Distributions received from unconsolidated affiliates
| |
6
| | |
—
| | |
6
| | |
—
| |
|
Proceeds from sale of auction rate securities
| |
9
| | |
—
| | |
9
| | |
—
| |
|
Withdrawals from restricted cash funds
| |
—
| | |
5
| | |
1
| | |
16
| |
|
Other—net
| |
—
|
| |
2
|
| |
—
|
| |
3
|
|
|
Net cash used in investing activities
| |
(72
|
)
| |
(696
|
)
| |
(157
|
)
| |
(1,358
|
)
|
| Financing Activities: | | | | | | | | |
|
Proceeds from short-term borrowings
| |
—
| | |
—
| | |
—
| | |
150
| |
|
Payments of short-term borrowings
| |
—
| | |
—
| | |
—
| | |
(150
|
)
|
|
Financing fees
| |
—
| | |
(5
|
)
| |
—
| | |
(5
|
)
|
|
Dividends paid on common stock
| |
(70
|
)
| |
(70
|
)
| |
(140
|
)
| |
(140
|
)
|
|
Issuance of noncontrolling interest in CFN
| |
—
| | |
—
| | |
—
| | |
2,800
| |
|
Distributions to noncontrolling interests
| |
(5
|
)
| |
(7
|
)
| |
(59
|
)
| |
(20
|
)
|
|
Net cash (used in) provided by financing activities
| |
(75
|
)
| |
(82
|
)
| |
(199
|
)
| |
2,635
|
|
|
Effect of exchange rate changes on cash and cash equivalents
| |
5
|
| |
(3
|
)
| |
6
|
| |
(1
|
)
|
|
Increase (decrease) in cash and cash equivalents
| |
689
| | |
(681
|
)
| |
837
| | |
1,722
| |
|
Cash and cash equivalents at beginning of period
| |
1,312
|
| |
2,689
|
| |
1,164
|
| |
286
|
|
| Cash and cash equivalents at end of period | |
$
|
2,001
|
| |
$
|
2,008
|
| |
$
|
2,001
|
| |
$
|
2,008
|
|
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL
INFORMATION
NON-GAAP DISCLOSURE ITEMS
Reconciliation of net earnings (loss), net earnings (loss) per ton
and net earnings (loss) as a percent of net sales (GAAP measures) to
EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted
EBITDA, adjusted EBITDA per ton and adjusted EBITDA as a percent of net
sales (non-GAAP measures), as applicable:
EBITDA is defined as net earnings (loss) attributable to common
stockholders plus interest expense (income)—net, income taxes, and
depreciation and amortization. Other adjustments include the elimination
of loan fee amortization that is included in both interest and
amortization, and the portion of depreciation that is included in
noncontrolling interests. The company has presented EBITDA, EBITDA per
ton and EBITDA as a percent of net sales because management uses these
measures to track performance and believes that they are frequently used
by securities analysts, investors and other interested parties in the
evaluation of companies in the industry.
Adjusted EBITDA is defined as EBITDA adjusted with the selected items
included in EBITDA as summarized in the table below. The company has
presented adjusted EBITDA, adjusted EBITDA per ton and adjusted EBITDA
as a percent of net sales because management uses these measures, and
believes they are useful to investors, as supplemental financial
measures in the comparison of year-over-year performance.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
|
Net earnings (loss) attributable to common stockholders
| |
$
|
3
| | |
$
|
47
| | |
$
|
(20
|
)
| |
$
|
73
| |
|
Interest expense (income)—net
| |
78
| | |
60
| | |
157
| | |
97
| |
|
Income tax provision (benefit)
| |
5
| | |
95
| | |
(8
|
)
| |
110
| |
|
Depreciation and amortization
| |
217
| | |
181
| | |
422
| | |
327
| |
|
Less: other adjustments
| |
(28
|
)
| |
(54
|
)
| |
(58
|
)
| |
(71
|
)
|
|
EBITDA
| |
275
|
| |
329
|
| |
493
|
| |
536
|
|
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
18
| | |
(211
|
)
| |
71
| | |
(190
|
)
|
|
Transaction costs(1) | |
—
| | |
165
| | |
—
| | |
179
| |
|
Loss on foreign currency transactions including intercompany loans(2) | |
1
| | |
38
| | |
1
| | |
83
| |
|
Capacity expansion project expenses
| |
—
| | |
19
| | |
—
| | |
35
| |
|
Equity method investment tax contingency accrual(3) | |
7
| | |
—
| | |
7
| | |
—
| |
|
Loss on embedded derivative(4) | |
2
| | |
—
| | |
3
| | |
—
| |
|
Loss (gain) on foreign currency derivatives
| |
—
|
| |
2
|
| |
—
|
| |
(1
|
)
|
|
Total adjustments
| |
28
|
| |
13
|
| |
82
|
| |
106
|
|
|
Adjusted EBITDA
| |
$
|
303
|
| |
$
|
342
|
| |
$
|
575
|
| |
$
|
642
|
|
| | | | | | | |
|
|
Net sales
| |
$
|
1,124
| | |
$
|
1,134
| | |
$
|
2,161
| | |
$
|
2,138
| |
|
Tons of product sold (000s)
| |
5,046
| | |
4,557
| | |
9,791
| | |
8,608
| |
| | | | | | | |
|
| Net earnings (loss) as a percent of net sales | | 0.3 | % | | 4.1 | % | | (0.9 | )% | | 3.4 | % |
| Net earnings (loss) per ton | | $ | 0.59 | | | $ | 10.31 | | | $ | (2.04 | ) | | $ | 8.48 | |
| EBITDA as a percent of net sales | | 24.5 | % | | 29.0 | % | | 22.8 | % | | 25.1 | % |
| EBITDA per ton | | $ | 54.50 | | | $ | 72.20 | | | $ | 50.35 | | | $ | 62.27 | |
| Adjusted EBITDA as a percent of net sales | | 27.0 | % | | 30.2 | % | | 26.6 | % | | 30.0 | % |
| Adjusted EBITDA per ton | | $ | 60.05 | | | $ | 75.05 | | | $ | 58.73 | | | $ | 74.58 | |
_______________________________________________________________________________
|
(1) |
|
Transaction costs relate to costs of various consulting and legal
services associated with the company's proposed combination with
certain businesses of OCI and the company's strategic venture with
CHS.
|
(2) | |
Loss on foreign currency transactions including intercompany loans
primarily relates to the unrealized foreign currency exchange rate
impact on intercompany debt that has not been permanently invested.
|
(3) | |
Represents an accrual on the books of Point Lisas Nitrogen Ltd.
(PLNL), the company's Trinidad joint venture, for a disputed tax
assessment. Amount reflects the company's 50 percent equity interest
in PLNL. This is included in equity in losses of operating
affiliates in our consolidated statements of operations.
|
(4) | |
Represents the change in fair value of the embedded derivative
included within the terms of the company's strategic venture with
CHS.
|
Reconciliation of net earnings (loss) attributable to common
stockholders and net earnings (loss) per diluted share attributable to
common stockholders (GAAP measures) to adjusted net earnings and
adjusted net earnings per diluted share (non-GAAP measures), as
applicable:
Adjusted net earnings is defined as net earnings (loss) attributable to
common stockholders adjusted with the impacts of the selected items
included in net earnings (loss) as summarized in the table below. The
company has presented adjusted net earnings and adjusted net earnings
per diluted share because management uses these measures, and believes
they are useful to investors, as supplemental financial measures in the
comparison of year-over-year performance.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
|
Net earnings (loss) attributable to common stockholders
| |
$
|
3
| | |
$
|
47
| | |
$
|
(20
|
)
| |
$
|
73
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
18
| | |
(211
|
)
| |
71
| | |
(190
|
)
|
|
Transaction costs(1) | |
—
| | |
165
| | |
—
| | |
179
| |
|
Loss on foreign currency transactions including intercompany loans(2) | |
1
| | |
38
| | |
1
| | |
83
| |
|
Capacity expansion project expenses
| |
—
| | |
19
| | |
—
| | |
35
| |
|
Equity method investment tax contingency accrual(3) | |
7
| | |
—
| | |
7
| | |
—
| |
|
Loss on embedded derivative(4) | |
2
| | |
—
| | |
3
| | |
—
| |
|
Loss (gain) on foreign currency derivatives
| |
—
| | |
2
| | |
—
| | |
(1
|
)
|
|
Financing costs related to bridge loan commitment fee(5) | |
—
| | |
28
| | |
—
| | |
28
| |
|
Income tax adjustments(6) | |
(8
|
)
| |
(11
|
)
| |
(28
|
)
| |
(37
|
)
|
|
Total adjustments
| |
20
|
| |
30
|
| |
54
|
| |
97
|
|
|
Adjusted net earnings
| |
$
|
23
|
| |
$
|
77
|
| |
$
|
34
|
| |
$
|
170
|
|
| | | |
|
| | Three months ended
June 30, | | Six months ended
June 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
|
Net earnings (loss) per diluted share attributable to common
stockholders
| |
$
|
0.01
| | |
$
|
0.20
| | |
$
|
(0.09
|
)
| |
$
|
0.31
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
0.08
| | |
(0.90
|
)
| |
0.30
| | |
(0.81
|
)
|
|
Transaction costs(1) | |
—
| | |
0.71
| | |
—
| | |
0.76
| |
|
Loss on foreign currency transactions including intercompany loans(2) | |
0.01
| | |
0.16
| | |
0.01
| | |
0.35
| |
|
Capacity expansion project expenses
| |
—
| | |
0.08
| | |
—
| | |
0.15
| |
|
Equity method investment tax contingency accrual(3) | |
0.03
| | |
—
| | |
0.03
| | |
—
| |
|
Loss on embedded derivative(4) | |
0.01
| | |
—
| | |
0.01
| | |
—
| |
|
Loss on foreign currency derivatives
| |
—
| | |
0.01
| | |
—
| | |
—
| |
|
Financing costs related to bridge loan commitment fee(5) | |
—
| | |
0.12
| | |
—
| | |
0.12
| |
|
Income tax adjustments(6) | |
(0.04
|
)
| |
(0.05
|
)
| |
(0.11
|
)
| |
(0.16
|
)
|
|
Total adjustments
| |
0.09
|
| |
0.13
|
| |
0.24
|
| |
0.41
|
|
|
Adjusted net earnings per diluted share
| |
$
|
0.10
|
| |
$
|
0.33
|
| |
$
|
0.15
|
| |
$
|
0.72
|
|
_______________________________________________________________________________
|
(1) |
|
Transaction costs relate to costs of various consulting and legal
services associated with the company's proposed combination with
certain businesses of OCI and the company's strategic venture with
CHS.
|
(2) | |
Loss on foreign currency transactions including intercompany loans
primarily relates to the unrealized foreign currency exchange rate
impact on intercompany debt that has not been permanently invested.
|
(3) | |
Represents an accrual on the books of Point Lisas Nitrogen Ltd.
(PLNL), the company's Trinidad joint venture, for a disputed tax
assessment. Amount reflects the company's 50 percent equity interest
in PLNL. This is included in equity in losses of operating
affiliates in our consolidated statements of operations.
|
(4) | |
Represents the change in fair value of the embedded derivative
included within the terms of the company's strategic venture with
CHS.
|
(5) | |
Not included in the calculation of EBITDA.
|
(6) | |
Represents the adjustment to the GAAP basis tax provision reflecting
the tax impact of the other non-GAAP adjustments.
|
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL
INFORMATION
NON-GAAP DISCLOSURE ITEMS
Reconciliation of cost of sales and cost of sales per ton (GAAP
measures) to controllable cost of sales and controllable cost of sales
per ton (non-GAAP measures), as applicable:
Controllable cost of sales is defined as cost of sales adjusted for
natural gas costs, realized and unrealized losses (gains) on natural gas
derivatives, and depreciation and amortization. The company has
presented controllable cost of sales and controllable cost of sales per
ton because management uses these measures, and believes they are useful
to investors, as supplemental financial measures in the comparison of
year-over-year performance.
|
| Three months ended
June 30, |
| Six months ended
June 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
|
Cost of sales
| |
$
|
952
| | |
$
|
607
| | |
$
|
1,883
| | |
$
|
1,394
| |
|
Natural gas costs(1) | |
309
| | |
170
| | |
615
| | |
346
| |
|
Realized net losses on natural gas derivatives(2) | |
4
| | |
61
| | |
3
| | |
117
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
18
| | |
(211
|
)
| |
71
| | |
(190
|
)
|
|
Depreciation and amortization
| |
205
|
| |
143
|
| |
398
|
| |
280
|
|
|
Total adjustments
| |
536
|
| |
163
|
| |
1,087
|
| |
553
|
|
|
Controllable cost of sales
| |
$
|
416
|
| |
$
|
444
|
| |
$
|
796
|
| |
$
|
841
|
|
| | | | | | | |
|
|
Tons of product sold (000s)
| |
5,046
| | |
4,557
| | |
9,791
| | |
8,608
| |
| | | | | | | |
|
| Cost of sales per ton | | $ | 188.66 | | | $ | 133.20 | | | $ | 192.32 | | | $ | 161.94 | |
| Increase in cost of sales per ton | | 42 | % | | | | 19 | % | | |
| Controllable cost of sales per ton | | $ | 82.44 | | | $ | 97.43 | | | $ | 81.30 | | | $ | 97.70 | |
| Decrease in controllable cost of sales per ton | | (15 | )% | | | | (17 | )% | | |
_______________________________________________________________________________
|
(1) |
|
Includes the cost of natural gas that is included in cost of sales
during the period under the first-in, first-out inventory cost
method.
|
(2) | |
Includes realized gains and losses on natural gas derivatives
settled during the period. Excludes unrealized mark-to-market gains
and losses on natural gas derivatives.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170802006433/en/
CF Industries Holdings, Inc.
Media
Chris Close
Director,
Corporate Communications
847-405-2542
cclose@cfindustries.com
or
Investors
Martin
Jarosick
Vice President, Investor Relations
847-405-2045
mjarosick@cfindustries.com
Source: CF Industries Holdings, Inc.